- OpenSea CEO Devin Finzer has expressed shock over the Wells Notice received this week and stated the exchange is “ready to stand up and fight”
- The SEC has sent the notice to OpenSea, indicating impending charges for allegedly selling securities without a license
- The SEC’s move has set the stage for a potential battle that could redefine the nature of NFTs
OpenSea CEO Devin Finzer has said that he is “shocked” by the Wells Notice sent to the company this week, saying that the exchange is “ready to stand up and fight.” The world’s biggest NFT exchange was hit with the notice, which is an indicator that charges are to follow, alleging that it is selling securities without a license. The move is not a surprise given the SEC’s recent enforcement actions, and it sets up a battle that could define the nature of NFTs forever.
Chastain Case Set the Stage
The question of whether NFTs are securities has been a consideration ever since they burst onto the scene in 2021. The suggestion was first raised in a legal sense when fired OpenSea employee Nate Chastain was charged with wire fraud and money laundering in 2022, with his lawyer claiming that the case was just a way for the SEC to regulate NFTs on someone else’s dime and at someone else’s personal cost.
Last year, the SEC sued made its own case by suing NFT issuer Impact Theory, alleging that some NFTs it sold reflected investments in their business endeavors and, therefore, passed the Howey Test for securities. This case is still ongoing.
SEC Finally Makes Its Move
Given these past developments, and the SEC’s attitude towards cryptocurrencies, it was not a surprise for many when Finzer revealed on X that OpenSea was likely to be the next target of the SEC’s regulatory wrath:
OpenSea has received a Wells notice from the SEC threatening to sue us because they believe NFTs on our platform are securities.
We’re shocked the SEC would make such a sweeping move against creators and artists. But we’re ready to stand up and fight.
Cryptocurrencies have long…
— Devin Finzer (dfinzer.eth) (@dfinzer) August 28, 2024
In his response, Finzer emphasized that NFTs are fundamentally creative goods, including art, collectibles, and video game items, and should not be regulated in the same manner as financial instruments like collateralized debt obligations. Finzer also desired the ‘regulation by enforcement’ espoused by Chastain’s lawyer, and warned of the impact that the SEC’s actions could have:
But this is a move into uncharted territory. By targeting NFTs, the SEC would stifle innovation on an even broader scale: hundreds of thousands of online artists and creatives are at risk, and many do not have the resources to defend themselves.
In a show of support for the NFT community, OpenSea has pledged $5 million to help cover legal fees for creators and developers who receive a Wells notice. “Every creator, big or small, should be able to innovate without fear,” the CEO added, underscoring the company’s commitment to defending the space.
OpenSea Finds Support Hard to Come By
Responses to Finzer’s statement were, on the whole, either dismissive or unsupportive:
They are securities tbh
— 𓂋 cre (@0xCre) August 28, 2024
You should’ve worked to decentralize your platform
Instead you promoted hot trash on your homepage, censored creators, gatekept verification badges, build out tooling to promote garbage mints
Still hope you win against SEC but ffs you not making it easy for us to root for you
— karbon 🐺🦊 (@basedkarbon) August 28, 2024
It took the SEC to get involved for opensea to care about artists
— Dark0 (@dark0eth) August 28, 2024
Clearly, the opinion of NFTs and OpenSea as a company is nowhere near as high as the crypto companies targeted by the SEC, something that doesn’t bode well for the company’s chances.
